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DBRS: Metros with High Fraud Risk to See Home Values Decline

While mortgage fraud risk has been on the decline, a newsletter from ""DBRS"":http://www.dbrs.com/ asserts those states still reporting high incidences of fraud may see their home values drop.


The ""latest report"":https://themreport.com/articles/mortgage-fraud-down-overall-in-q3-2012-11-26 from ""Interthinx"":http://www.interthinx.com/ shows fraud risk (as measured by the company's Mortgage Fraud Index) fell 4.5 percent year-over-year in 2012's third quarter, falling to the lowest level recorded in the past two years. In addition, the number of metropolitan statistical areas (MSAs) classified as ""very high risk"" declined on a national level.

However, DBRS notes certain states, including Nevada, California, Arizona, New Jersey, and Florida, continue to report high numbers of high-risk metros, revealing that a large amount of risk remains concentrated in a smaller number of states.

While the overall drop in the index shows a promising trend for mortgage fraud, DBRS says the states reporting the most risk may have more than simply fraud to worry about.

""It is expected that the states that exhibit the highest levels of mortgage fraud will also see greater declines in their property values,"" DBRS' newsletter states. ""And since property-tax revenues generally trail changes in property values, declines in property values will translate to lower amounts of property taxes that can be levied by state governments.""

""If properties in these MSAs continue to experience declines in value, more and more mortgages will go underwater, which negatively impacts the economic vitality and health of communities,"" the rating agency continues. ""This may lead more cities and counties attempting to seek drastic options such as using eminent domain to seize and rehabilitate underwater mortgages, which is ""currently being considered"":http://www.dsnews.com/articles/san-bernardino-county-considering-use-of-eminent-domain-to-rescue-underwater-homeowners-2012-06-29?no_redirect=true in several states.""